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house prices

On 12 Apr 2013 at 2:24pm jrsussex wrote:
Some of you may recall that I recently posted on the forum that in my experience the various recessions I have lived through have been preceeded by utterly ridiculous property value increases. There is a good letter in the Sussex Express (page 31) this week from a Laurence Keeley. He is absolutely right, property value is only paper money until you either sell up and go into a nursing home or pass away and leave to your children.
On 12 Apr 2013 at 6:00pm Sussex Jim wrote:
It is not a good letter. Laurence Keeley regularly writes on the same subject.
He is right that property has no value until sold on, but it is historically a better investment than money in a savings account or gambled on the stock market.
Plus the fact that you need somewhere to live! You cannot reside in a building society book or a share certificate.

john Major (remember him?)
It is not a good letter.Laurence Keeley regularly writes on this subject. He is right in that a property will only produce value when you sell it. But it is still historically a good investment.
Plus, you need somewhere to live. You cannot reside in a building society book or a share certificate.
John Major (remember him?) said that he would like to see wealth cascading down through the generations. The thing to do is to buy as much property as you can afford. Then downsize when you retire, and leave a legacy to help your descendants.

On 12 Apr 2013 at 6:42pm jrsussex wrote:
Whether he writes good letters or not you are, in my opinion, missing the point. The relentness rise in property prices will ensure that in the years ahead there will be further recessionary periods. The relentless increases are the only reason that property is the investment it is, but look at the damage it has done. In the main that damage is to the working class, ask the many thousands who have experienced the various recessions since the 60's about the negative equity that ruined their lives, which led to break down of marriages thus affecting families, destroyed small businesses and in extreme cases led to suicides. In addition it has brought us to a situation where the average working person struggles to get on the so called property ladder.
On 12 Apr 2013 at 6:54pm Southover Queen wrote:
That's a seriously circular argument, Jim. And it also completely misses a couple of economic points which I think are important.

The first would be that a huge proportion of the nation's wealth is entirely sunk into bricks and mortar. Many of us are very cash poor while asset rich, and what that means is that we're not investing in industry or business because we've sunk every spare penny in our houses. It also makes the population less flexible and less mobile, and it's inflationary too: if your housing costs accelerate then you'll want to be paid more to pay them.
Many of us are now completely in hock to our homes. Many don't have pensions, for instance, relying instead on the value of their house to bankroll them through retirement. However that means that we'll either have to sell our houses or engage in some dodgy equity release scheme to get at it.

On a larger economic scale I'd say that we're in a very peculiar position because what society desperately needs - more houses - is in direct contrast to what is good for house builders. For them, keeping the supply low means keeping the prices high, so they're not building.

I think we'd be much better off if we didn't have this obsessive reliance on house prices, personally. Why does a modest house in Lewes need to cost £500,000? Why is it better than that same house costing £250,000, leaving us with £250,000 to invest in a business, in shares in industry or in nice holidays?

Others would argue that all you're doing if you buy up strings of houses and inflating their value is actually making it quite impossible for the next generation to do the same. And if you end up living in an expensive carehome until you're 95 you won't be leaving much to your descendants either...
On 12 Apr 2013 at 7:04pm Nevillman wrote:
It's interesting that in the boom, house prices in the UK rose. In Spain and Ireland (maybe elsewhere - I don't know) they built lots of houses and now there are too many houses and people can't sell for any price. Does anyone know why it was different here?
On 12 Apr 2013 at 8:03pm Annette Curtin-Twitcher wrote:
Perhaps because there are stricter planning controls here?
On 12 Apr 2013 at 9:01pm grafter wrote:
The population of Eire is little more than half that of greater london. The reason prices remain high in the south east is pretty obvious. Plenty of "affordable housing" in the former industrial heartlands. Not many jobs though....
On 12 Apr 2013 at 9:11pm Southover Queen wrote:
That's right, grafter. And I bet a big reason for people not being able to move south in search of work is because they are simply unable to afford the housing costs. That's what I meant by "inflexible".

There is one other factor, which is that in London the very top end of the market is being bought up by super-rich Russians and Chinese, which is helping to keep the south east's prices high.
On 12 Apr 2013 at 11:03pm GhostBike wrote:
House prices are just debt, I wish people could see that. There has been a huge increase in mortgage debt over the past decade - that it what has produced the boom. It's also massively transferred wealth from the young - who are expected to take on vast debts just to provide a roof of their heads - to the old.
On 13 Apr 2013 at 12:44am Local wrote:
Rarely have I seen such bunkum posted on a thread on here.
Russian and Chinese mega-rich keeping the whole south=east's house prices high? Sounds like trickle -down economics to me, which has been dismissed on here as nonsense!
High house prices do not cause recessionary periods.
Can anyone tell me when - and in which country on this fine earth - have land and house values in peripheral areas matched those in the capital cities and their hinterlands? Hardly a new post-Thatcher thing, surely?
Eire experienced a genuine property bubble, built on lies, cronyism, corruption, greed and economic nonsense to an extent never ever seen in the UK. It also followed an explosion in credit provision in Eire, rather like that in the UK in the mid to late 80's.
People deciding to rely solely on their homes for pension provision are idiots, and deserve that they get. No decent financial advisor on earth would advocate putting all eggs into one basket.
Does anyone know the value to UK plc of the house-related sector? If everyone lived in cheap rented accommodation provided by councils, where would that leave B&Q, Farrow & Ball, builders, tilers, decorators, Chandlers, scaffolders, etc etc?
What % of inheritance tax receipts are down to house values being passed through the generations?
Has anyone got figures for how many people invested in industry with their spare cash before house prices became such a drain on their wallets? About 1% at best, I'd reckon. But why don't people on here admit that one of the key benefits of Thatcher's right to buy policy was that ordinary working people suddenly had an asset against which to borrow money to invest in THEIR OWN businesses. Many did, and never looked back.
By the way, the average stay in a care home is about 18-21 months, so even at £800 a week and today's interest rates, there's plenty of asset value available for others to utilise if house prices are nice and high.
And to close for now, does anyone actually know of anyone who has decided to ignore the market value of their home in Lewes, and instead sell to a deserving locally-born and bred person for half of that value? Perhaps when their parents died, and the sale proceeds weren't directly needed to keep a roof over the family's head. Thought not....
On 13 Apr 2013 at 12:52am Goatman wrote:
I think it's a total disaster that Osbourne promised £130bn of taxpayers money to fund home buyer's deposits at the last budget. These are technically loans - but all they will do is inflate house prices to cause a larger crash/crunch further down the road (after the election) - again! Why not invest in industry/training rather than another housing bubble? There should be much more about this in the press. It's possibly the main choice facing govts now.
I agree with Southover Queen; creative, productive communities flourish where housing is affordable and not such a repository of wealth/debt. The best thing, for the majority, would be if housing prices remain flat for another 10 years (along with some rent controls and home building/self-build). True wealth and lies elsewhere.
On 13 Apr 2013 at 12:57am Goatman wrote:
oops! that was meant to say 'true wealth lies elsewhere'. Meaning is totally different!
On 13 Apr 2013 at 7:11am Annette Curtin-Twitcher wrote:
I think the mega-rich's buying up central London property has an inflationary effect on prices in the wider area. It's more of a ripple-out than a trickle-down thing.

People who might otherwise have bought centrally will have been forced to look further out, people with a bit more to spend, who might have bought in places like Richmond, then buy in areas like Wandsworth and Ealing and so on until you get to places like Croydon, when people think "sod this, I'll go right out" and buy in Surrrey or (what was) Middlesex.

Then commuters can't afford those places and go further afield to Three Bridges etc.

I think we've seen this on a local level, too. After a few years of Lewes prices rising faster than the surrounding areas, in the last couple of years the difference between Lewes prices and those in Seaford or Ringmer seems to have narrowed somewhat as people consider the next nearest place that isn't actually a sh!thole. Eight years ago, I could have bought in a nice part of Seaford and ended up with a bigger house and no mortgage, that's not the case now.

When the number of people buying and selling is so much smaller than it was, it only takes a small number of buyers or sellers to have an effect on prices. It's like the market is a microcosm of what it was, and the effects of small changes in supply and demand are magnified. There are loads of "for sale" boards on the Nevill at the moment, and I daresay you stand a better chance of negotiating a reasonable drop on the asking prices now than you would have done a few months ago.

I agree it's a bit of a chimera though. You only gain or lose if you sell, and in the latter case you only really gain if you're trading down. Exceptionally low interest rates are the only thing keeping the market moving, and I think that's why they've stayed so low, for so long. If they went up, even a couple of %, lots of people would find themselves overcommitted and prices would fall because of repossessions and people trading down. The low interest rates do the retired and people not far off retirement no favours because they rely on investment ioncome in the former case and annuity rates have fallen so low in the latter.

And you'd have thought that seeing what a mess lending to the margins of affordability did for the banks would have put Gideon right off the idea of fronting loans for homebuyers, but I guess as it's our money, it doesn't really matter.

It seems governments of all shades are terrified of the electoral effects of allowing house prices to fall. I think they need to come down dramatically, but that's easy to for me to say as I bought years ago so it wouldn't really affect me. If I wanted to move, whatever I bought would be cheaper too.
On 13 Apr 2013 at 8:36am Matt Kent wrote:
Shelter England have a very comprehensive interactive database that can give you all the facts and figures about local housing need, affordability, council housing numbers, waiting lists, rents, homelessness etc. You'll be surprised how out of reach the cheapest housing is based on the average salary of a Lewes resident. Its worth a look (via the link)

Check it out here »
On 13 Apr 2013 at 9:29am Southover Queen wrote:
Local, you are always very keen to dismiss everything I say; I just wish you'd do some basic research before doing so. I suggest that you google "London house prices": you'll come up with several articles and studies which discuss the fact that London and the South East have bucked the trend in falling or stagnant house prices and that the reason is overseas buyers, in particular those from China and Russia, looking for stable investments for their money. I've linked to one of them; there are plenty of others. ACT correctly fills in the details about why the super rich buying expensive property in London skews the market for ordinary buyers.

As for pensions: no, and my own financial advisor would have strongly urged me not to rely on the value of my house when I consulted him about a private pension. I spent 20 years paying a significant proportion of my not terribly impressive income into one which performed poorly even during the boom years, and tanked impressively when the banks went belly-up. So instead of a projected pension of £12k per annum approx I can now expect less than £5k. The total pot is actually worth less than I paid into it.

Much as I wish it were not so, and try as I did to avoid it, my overwhelming asset is my house and if/when I retire it will have to go. Another of your somewhat scornful remarks said that virtually no-one invests in industry: actually, they do. I certainly have, through my pension fund, and I would hazard a guess that a large proportion of investment into industry both at home and abroad comes from pension funds exactly like mine. I would probably have paid more into a fund rather than paying an enormous mortgage, although that clearly would actually have left me even worse off...
On 13 Apr 2013 at 10:22am grafter wrote:
I have the same issue with my pensions. I now wish I had instead put the money into paying off my mortgage sooner. But then I no longer expect to retire,yes I might work shorter days or weeks but I intend to continue until I am unable. The concept of mass retirement may in fact turn out to have been a 20th century phenomenon. Luckily I enjoy working but its going to be hard on those who hate their jobs (if they can get one.)
On 13 Apr 2013 at 11:49am Local wrote:
I'm sorry if I sound dismissive.
But it's the desirability of London and the south-east as a place of employment and connections that keeps prices rising there. The mega-rich from overseas certainly inflate the averages, but I don't see much effect on people like my brother by Kensington Gardens houses going for £60m instead of £15m; he's only ever been a Streatham-area sort of chap, so a £150k house for him in the early 90's might well have become £375k today, but that's no different a % rise from my sister in Newcastle or friends in Yorkshire. People will always pay more to live somewhere nice - no different to holidays or cars or cosmetics, etc
I'm also sorry about the investing in industry comment; I didn't see any mention of indirect investment through pension funds (or indeed via simple bank deposits). That point is precisely one I've made before on here to those moaning about dreaded big business; the BPs of this world are vital to everyone's wealth and prosperity.
Finally, I don't work for them, but for better pension performance you could try taking a look at SIPPs through Hargreaves Lansdown. Never made a better decision personally - traditional pension funds / companies are hopeless, but something's really really wrong if you're in a net-loss situation after twenty years of paying in...
On 14 Apr 2013 at 7:09am Annette Curtin-Twitcher wrote:
We've all been royally shafted on the pension front.
Years ago I decided that all private pensions were a gamble and I'd be better off in SERPs/S2P. Paid into it all these years, now the government has done a Maxwell with all that money and my main pension will be no more than if I'd been on benefits all my life.
The combination of poor stock market performance and falling annuity rates is a disaster for many. Fund performance has been a lot better this year SQ, a tiny pension of mine has gone up by more than 10% and I'm not even paying into it eny more. But that's not going to make a huge difference when annutiy rates are barely half what they were a few years ago (they've fallen from around 8% to around 5%). That's a huge loss in income.
I know part of the fall is because of the actuarial effect of rising life expectancy, but they do reflect interest rates as well.
On 14 Apr 2013 at 4:01pm Local wrote:
Index-linked annuity rates with a spouse % for people in their 60's are down to about 2.5%! Bearing in mind that pension income is also taxable, it's a good thing that everyone's tax-free threshold will soon be £10k!
On 14 Apr 2013 at 7:40pm TownFlyer wrote:
The point about SP2 really interests me, and as yet I don??t think the government has decided how to handle this problem. I have paid into SERPS (as was) all my working life. Does anyone actually know for sure how we will be compensated for this?
On 14 Apr 2013 at 9:45pm Local wrote:
I suspect you'll be feeling rather like 'the rich' feel when they get stung in the name of equality.
This is a classic example of wealth redistribution - some will win, some will lose. In this case, those who have dutifully paid from their 'wealthy' income will be the losers.
Nice feeling, isn't it?
On 16 Apr 2013 at 6:58pm Annette Curtin-Twitcher wrote:
That's interesting, TF. My understanding was that we'd all get the same, whatever. My last state pension forecast was for £140 a week, and that was after they announced the flat-rate £140 pw.
However, a quick google found this from the Telegraph about a year ago:
"Almost all people who have never been out of work for a long period will have paid into the top-up State Second Pension (S2P) or its predecessor, Serps. They will receive less under the flat-rate pension than under the current system. "

I'm meeting up with a friend in the pensions business in a couple of weeks, I'll check it out with her, see if she knows any more.

On 16 Apr 2013 at 10:32pm Local wrote:
There's not much more to find out. By guaranteeing the worse-off a flat-rate pension that everyone will get, there are also some losers. The main thing to look out for is the number of qualifying years required, which also increased for the new flat-rate deal.
On 17 Apr 2013 at 2:21pm I dont live in lewes... wrote:
TF and ACT.
There is an online pension forecast service which gives your estimated total pension and breaks it down in to it's composite parts. Basic State Pension (30 qualifying years)/ Graduated Retirement Benefit/ etc.
You need to apply for an activation code/ user ID before you can use the service. This arrives by post within a week.
With the activation code/user iD and your NI number /DOB it's a simple form and when submitted online will give you the figures which you can then print out.
Having paid all demanded dues to Her Majesty's Royal Gov' for what feels like for ever and a day I was clueless as to what my state pension may be.
TIP! Don't get too excited...

Check it out here »

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